1. Alternative Fee Arrangements: Pros, Cons and Ethical Considerations
Jean L. Bertrand

2. For some of us, never went “out”
Last in vogue in 1990’s
For some of us, never went “out”
AFA’s are “in” again

3. Some Statistics G.C. survey: 24% use billable hour model only
Companies with revenues > $1B: only 12% use billable hour model only
AFA discussions initiated by law firms: 3%
Some Statistics

4. Perils and Pitfalls: Ethical Concerns

5. Conflict in Every Fee Deal
There is an inherent conflict in every fee deal
If you win  the client was right all along so why should they have to pay lawyers?
If you lose  you messed up and you charged too much.

6. Solution Give value to the client as defined by the client
Let the client set the level of risk it is willing to take
Build on a relationship based on trust
Incorporate escape clauses for both client and firm
Align the interests of firm and client

7. Selecting an AFA Match the AFA to the client’s driving need
If the client’s biggest concern is the end result  contingency fee
If cost is the driver  blended fee
If predictability is key  flat fee
If the client cares most about access to top legal talent  retainer/bonus structure

8. Selected Ethical Considerations

9. Our duty to zealously represent our clients
 Tension with firm’s economic interests
Fixed fees
Capped fees
Blended rate deals
 A different tension if flat fee is too low

10. Solutions Disclosure, discussion, write it down
Motivate lawyers and legal assistants
Reward results

11. Our duty not to impair the client’s absolute right to fire us
 Tension with firm’s economic interests
Contingency fees
Bonus deals
Other back-loaded arrangements

12. Solutions Disclosure, discussion, write it down
Motivate lawyers et al.
Use a guaranteed reduced hourly-rate set-off against contingency fee recovery
Be aware of special rules applicable here

13. Our fees must be reasonable
Tension with firm’s economic interests
contingency fees
fixed fees
partner-only deals
bonus deals
Reasonableness will be evaluated at the beginning
And at the end

14. Solutions Disclosure, discussion, write it down
Motivate lawyers et al.
Quantum meruit conversion clause
Escape clause
Make bonus discretionary

15. Hourly billing raises ethical issues too
Reasonable fees duty
Obligation to be efficient

16. Ethical rules govern the way we handle the client’s money
Tension with
flat fees
bonus deals

17. Solutions Disclosure, discussion, write it down
Agree in advance on “milestones”
Use Trust account